MADISON, Wis. -- Governor Scott Walker today, through the Office of the Commissioner of Insurance (OCI), submitted the 1332 Waiver for State Innovation Application under the Affordable Care Act (ACA) for federal approval. 2017 Wisconsin Act 138 allows Wisconsin to leverage federal funding for the operation of a state-based reinsurance plan; the Health Care Stability Plan. Upon federal approval, Wisconsin estimates premiums will be reduced by 10.6 percent from levels that otherwise would have occurred, resulting in a 5 percent decrease in 2019 premiums, compared to 2018.

“Premiums in Obamacare’s individual market went up by 44 percent on average this year (2018). Some saw much larger increases. That is unsustainable and unacceptable,” said Governor Walker. “We are taking action to address the challenges created by Obamacare and bring stability to the individual market. Our Health Care Stability Plan provides a Wisconsin-based solution to help stabilize rising premiums in order to make health care more affordable for those purchasing in the individual market. With Washington D.C. failing to fix our nation’s health care system, Wisconsin must lead.”

Under the ACA, Wisconsin consumers continue to lose coverage choices as insurers leave the individual market or shrink service areas. As a result, over 75,000 Wisconsinites had to change insurers for their 2018 coverage and many of them had one or two insurers to choose from. In the last three years, insurers have lost over $400 million in Wisconsin’s individual market. Insurance rates have skyrocketed – rate increases averaged 44 percent across the state and in some areas were as high as 105 percent.

Absent federal action, Wisconsin’s Health Care Stability Plan creates a reinsurance program to cover costs in Wisconsin’s individual market. The program will provide $200 million in reinsurance funding. Under the program, Wisconsin estimates it will pay $34 million for reinsurance in 2019; the federal government will pay the remaining $166 million in “pass through” funds representing federal savings from the program. The program will provide coverage for claims between $50,000 and $250,000. The Wisconsin Health Care Stability Plan is estimated to pay 50 percent of those costs up to $200 million.

Upon federal approval of the 1332 waiver, Wisconsin estimates premiums will be reduced by 10.6 percent from levels that otherwise would have occurred, resulting in a 5 percent decrease in 2019 premiums, compared to 2018.

“Without Governor Walker’s leadership on this important issue, Wisconsinites would be facing a more unstable market,” said Wisconsin Commissioner of Insurance Ted Nickel. “Wisconsin has worked diligently to shield consumers from the negative impact of the ACA. The Wisconsin Health Care Stability Plan is needed to offset some of the high cost claims driving up health insurance rates. It is a step towards improving access to affordable health insurance coverage across the state while using the tools and working within the parameters imposed from the federal government.”

A 1332 Waiver under the ACA permits states to pursue innovative strategies to ensure residents have access to affordable health insurance options. The waiver requires federal approval and must: keep coverage as comprehensive and affordable as it was without a waiver; keep coverage available to at least a comparable number of state residents as would be provided absent the waiver; and be budget neutral to the federal government.

For more information on Wisconsin’s 1332 Waiver Application, visit oci.wi.gov.

In February 2018, Wisconsin enacted a new law creating a state-based reinsurance program, which is designed to hold down premiums in the state’s individual health insurance market. Wisconsin’s law comes on the heels of rapid premium increases and declining risk pools in 2018, when premiums rose by 44 percent, and enrollment fell by more than 10 percent. Over the last two years, several large health plans have stopped offering coverage in Wisconsin’s individual market, and others have shrunk their service areas, forcing tens of thousands of enrollees to switch insurers (see Figure 1).

Wisconsin’s Healthcare Stability Plan (WIHSP) was created under the Affordable Care Act’s (ACA) Section 1332 waiver program, which allows states to create alternatives to the ACA’s insurance markets. As a waiver program, Wisconsin must apply for federal approval; in return, the federal government will reimburse Wisconsin for the savings the waiver creates for the federal government.

Wisconsin’s WISHP waiver will provide $200 million in reinsurance funding to help the state’s remaining insurance carriers cover the cost of high-risk patients. Under the waiver, Wisconsin will pay about $34 million for reinsurance in 2019; the federal government will pay the remaining $166 million in “pass- through” funds representing federal savings. (Because reinsurance waivers reduce premiums, the federal government also saves money on federal subsidies for ACA premium assistance.)

The state’s reinsurance program will pay about 50 percent of insurers’ claims costs for patients with claims between $50,000 and $250,000 in 2019. Wisconsin estimates this will reduce premiums by 10.6 percent from levels that otherwise would have occurred,1 resulting in a 5 percent decrease in 2019 premiums, compared to 2018.

The state’s share of WIHSP funding will be appropriated out of general purpose revenues (GPR). If approved, the state may extend the waiver for up to 5 years. Payments to insurers for 2019 claims would be made in early 2020.

Table 1 summarizes the state’s individual market for health insurance in 2017 and 2018 and shows the impact of reinsurance in 2019. As stated above, under WISHP, consumer premiums are expected to fall by about 5 percent in 2019, compared with 2018 levels. Under the WISHP waiver, the number of people enrolled in Wisconsin’s total non-group ACA compliant market is expected to stabilize at just over 200,000.

After a month-long public comment period, Wisconsin submitted the WIHSP waiver application and accompanying actuarial and economic analysis on April 19, 2018. Approval is anticipated later this summer, and the state’s final 2019 pass-through funding rate will be determined after final 2019 premium rates are reviewed and approved.